Is trading really that difficult or do we make it difficult? Can trading less equal more?
I’m probably not alone in occasionally (mentally) re-visiting my first few months of full -time trading. Looking back it was a torrid time. I’d watched the industry I’d dedicated over a decade to, the mortgage industry in the UK, collapse as the 2007/2008 crises hit. Having specialized in creating mortgage leads from websites I knew my game was up when some of the leads couldn’t be sold for a pound each, let alone the fifteen-twenty pounds each previously.
Having been an investor and Forex position trader it felt like a natural transition to eventually become a full time FX trader. Looking back I’m not sure whether or not it was luck, or some kind of divine intervention or inspiration, that led me to full time trading. But here I am, some five/six years on and taking a snapshot of where I am in the industry and what I’ve achieved so far, it’s been a good journey and the decision to fully commit has worked out. However, I still keep at the forefront of my mind the memories of the emotions I experienced early days in my new career. There are many experiences I could easily choose to forget but I never do, the reminder of the ‘darker’ days has ensured that I retain empathy for what new traders must be experiencing during the early days of their careers.
We can only offer up advice, all of us have to walk down our own individual path in order to eventually become proficient and profitable. However, there are several constants in our trader metamorphosis. It’s inevitable that we’ll go through various stages of development and the learning curve at the beginning of the journey is so steep it’s hardly surprising how confused and emotional many of us become before we eventually clamber over many obstacles, some of which we inadvertently place in our own path.
One aspect of the ‘trader journey’ most of us will identify with is how complicated we make the process in our early days to then inevitably strip trading back ‘to the bare bones’ as we develop. It’s a ‘rights of passage’ most of us have to undergo. Typically we’ll experiment with all kinds of; indicators, patterns, time frames, securities to trade, times of day to trade…the list goes on.
I’ve given some deep thought over the years as to whether or not there’s any method by which individual traders could bypass the steep learning curve with all its baggage and just arrive at a point in time where they only concentrate on the salient aspects of trading in order to enjoy success. However, I don’t think its possible, traders must experience all the highs and lows in order to become fully developed. Those mistakes you make early days are part of the education process that have to be experienced. In many ways they shape our personal development as a trader. Whilst we may look back at our early trading days and the darker experiences and shudder, the invaluable lessons we’re self taught during that process is essential for our personal development.
Simplify everything
There’s a television programme on UK TV that my kids really enjoy, it’s called The Cube. The idea of the game is to enter a cube and certain tasks are given involving coordination. The contestants are given a certain amount of chances to complete the tasks. After each chance they can ask the presenter to “simplify” the game. So if the game involves getting balls into a barrel the barrel may be replaced with a bigger barrel, or the contestants are allowed to step nearer the barrel, or both.
When I hear the words “cube, please simplify” I always think or trading and how if we really simplify it down to the minimum amount of actions we have to take then, just like the cube game, we’ll be giving ourself a much greaser chance of success. Moreover in the 3Ms we often talk about; method, money management and mind, we’ll be putting all three under an element of control and particularly the mind aspect will see us reduce the stress levels considerably if we ‘simplify’ our trading. So how do we go about simplifying trading, how do we cut what’s required down to ‘the bare bones’ in order to hopefully enjoy success? By far the most positive adjustment traders can make to their trading habits is often overlooked…
Trade less.
It may appear to be slightly counter-intuitive to what comes naturally, but trading less is an essential development that traders must make. In our early days of trading we build up images of what trading will look like; high paced, stressful, frenetic, but typical iconic trading floors are disappearing to be replaced by morgue like libraries of study. Your own personal trading space should be an oasis of calm and your attitude to trading the same.
It might surprise many traders to learn that a high percentage of successful traders, who for example, bet in the spread betting industry in the UK, place one single bet each day on the FTSE by use of; market orders, take profit limit orders and trailing stops. They predict the index to go up or down. They’ll place five bets in a week, perhaps risking 1% of their account each time they bet. They’re aiming to be ‘right’ half the time, but for the winners to run and the losses to be kept to a minimum. This simplest form of trading has an excellent chance of success, and the 3Ms are all addressed.
Of particular interest is how that potentially most damaging of issues, the mind, can be kept calm using such a simplified method. No looking at the charts on monitors every few minutes, trying to ‘stare up’ or ‘stare down’ your position as it weakens, you use the platform and technology you’re broker provides to place your simple bet, in full knowledge that your worst outlook that trading day will be a 1% loss. Your chance of gain is 2%. The previous fear may begin to transform into a genuine form of excitement as you causally check in on the market movements during key times of the day.
Trading less and therefore controlling your emotions and under-pinning your losses, seems so easy in theory, in practice impatience and greed can often manifest and they make for bad bedfellows when new traders start their journey. In many ways our hard wired circuitry needs to be confronted when faced with the dilemma that less will equal more. However, the majority of successful traders will testify that it is in fact true. Less does equal more in our trading world.
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